FSC fines 4 firms over Lee Kun-hee accounts

May 16,2019

Four brokerages have been fined a total of 1.24 billion won ($1 million) for opening accounts under a name other than the beneficiary owner Samsung Group Chairman Lee Kun-hee.

The Financial Services Commission (FSC) on Wednesday announced that Samsung Securities, Korea Investment and Securities, Mirae Asset Daewoo and Shinhan Investment were found to have opened accounts for Lee under the names of other people.

It said the fines were only for the opening of nine accounts out of the total 427 that were freshly discovered last year.

The accounts were opened before Aug. 12, 1993, when the regulation banning the opening accounts under false identity was adopted. But the false information was not amended by Lee after the law was passed, so the accounts were found to be in violation.

Although other accounts were found to be opened under false names, the current law does not impose fines on accounts opened if the named owner verified their identity personally. It was unclear whether some of the accounts were opened properly or without the knowledge of the person named on the account.

Shinhan received a 484-million-won fine, the largest of the fines, for having two of Lee’s accounts under other people’s names. Korea Investment and Securities was fined 399 million won, and Mirae Asset Daewoo 319 million. They both had three accounts. Samsung Securities was fined 35 million won for a single account.

A total of 880 million won was found in the two accounts at Shinhan; 725 million won at Korea Investment and Securities; 581 million at Mirae Asset Daewoo; and 63 million won at Samsung Securities.

Additionally, the regulator required the ownership of the nine accounts will be changed to Lee’s name.

According to the FSC, 400 accounts were reported by Lee Kun-hee representatives in May last year. The Financial Supervisory Service (FSS) in October last year discovered an additional 37 accounts. But 10 of the accounts were found to have already been discovered by a special investigation team in 2008.

A special prosecutor in 2008 found Lee holding more than 1,200 accounts under other people’s names, which led to the conviction of the Samsung chairman.

The FSC said it has found that 2.2 billion won was stashed in the nine accounts in 1993, which was when the regulations were changed banning the opening of accounts under a false identity.

It has imposed a 50-percent fine on the total assets and an additional 10 percent for unpaid fines, bringing the total to 1.24 billion won.

In April last year, the government fined four brokerage firms 3.3 billion won on 27 accounts among the 1,200 that were found during the 2008 investigation.

The fine was criticized for being too small considering that over 2 trillion won was sitting in the accounts.